{"id":21856,"date":"2024-06-04T07:30:32","date_gmt":"2024-06-04T11:30:32","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=21856"},"modified":"2024-06-04T07:30:32","modified_gmt":"2024-06-04T11:30:32","slug":"dont-be-fooled-by-this-bull-trap","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/dont-be-fooled-by-this-bull-trap\/","title":{"rendered":"Don\u2019t Be Fooled by This Bull Trap"},"content":{"rendered":"

Watch out!<\/p>\n

The stock market’s spectacular intraday reversal on Friday may turn out to be a bull trap.<\/p>\n

Bull traps are moves designed to sucker folks back into the stock market just before another large down-draft begins. And Friday’s action had all the telltale signs of one.<\/p>\n

Seemingly Good News<\/h2>\n

Stocks were selling off for most of Friday’s session. By midday, the S&P 500 was trading below the 5200 support level. The Volatility Index (VIX) was spiking higher – showing an increase in investor fear. It looked like the market was poised to fall off a cliff.<\/p>\n

But then, in the final hour, we got the sort of “gamma-squeeze” we’ve seen with increasing frequency since the creation of 0DTE (zero-days-to-expiration) options (you can read up on this phenomenon in this essay<\/a>).<\/p>\n

The S&P recovered some of its losses and then bolted higher to recover all of its losses – by the end of the day it was up nearly 1%.<\/p>\n

The buying pressure continued yesterday morning. And now, lots of folks are talking about another move to new all-time highs.<\/p>\n

Those folks may be right. But, there is one glaring problem.<\/p>\n

We Could Be in for a Big Decline<\/h2>\n

The Summation Index for the NYSE flipped to a sell signal last week. Take a look…<\/p>\n

<\/p>\n

\"Image\"<\/p>\n

This Summation Index is another technical tool for measuring market momentum.<\/p>\n

Whenever the NYSI rallies above its 9-day EMA (the blue line on the chart), it indicates that momentum is turning higher – and that’s usually a good time to buy stocks.<\/p>\n

Whenever the NYSI falls below its 9-day EMA, momentum is waning. That’s usually a good time to sell.<\/p>\n

The red lines on the chart show the sell signals over the last two years. Here’s how those sell signals lined up with the S&P 500…<\/p>\n

<\/p>\n

\"Image\"<\/p>\n

Three of the four previous NYSI sell signals led to an immediate decline in the stock market. The decline last May was quite mild – just over 100 S&P points. But the declines this past April and last August were more significant.<\/p>\n

There is no way to know if the current NYSI sell signal will lead to a small decline or a large one. Heck, it might even lead to the market just marking time for a few sessions before stocks blast higher again – like they did in January.<\/p>\n

<\/p>\n

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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n

<\/p>\n

So, I’m not suggesting folks liquidate all of their positions and take a full 100% short trade.<\/p>\n

I am suggesting, however, that rather than getting caught up in the current casino-like atmosphere of the stock market, folks might want to be a bit cautious here. NYSI sell signals have a good track record. <\/p>\n

So, until this one is negated – with the NYSI closing back above its 9-day EMA – it is possible, even likely, the bounce that started last Friday is a bull trap. Traders should approach it with caution.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
Editor, Market Minute<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Don\u2019t be suckered back into the market from a bull trap, this is what to really expect\u2026<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-21856","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/21856","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=21856"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/21856\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=21856"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=21856"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=21856"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=21856"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=21856"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=21856"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=21856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}